NBR move to overhaul taxation regime falters

Reformation continuous process, its chief says

The National Board of Revenue (NBR) has initiated a plethora of reform initiatives since the 1990s, but those have produced little results in overhauling the taxation regime, officials and experts say.

One case in point is the modernisation plan under which the revenue board aimed to raise taxation to GDP (gross domestic product) ratio to 13 per cent by 2016.

But that goal remains elusive, with the ratio hovering at 10 per cent until fiscal year 2017-18.

The reform projects also aimed to stem tax evasion through introducing digitised system while stopping taxpayers' harassment by limiting physical visits to tax offices.

An FE investigation found most of the reform projects were either not sustained or proved ineffective.

Piecemeal basis projects without proper evaluation, ownership and changes in leadership made the projects unsuccessful.

Except for the online issuance of Taxpayers Identification Number (TIN), other digitisation efforts yielded no positive outcome.

Tax-collecting authorities had to suspend many of the initiatives, including e-payment of tax just after a few months of its grand inauguration.

Former chairman of the NBR Abdul Mazid said the bulk of the money of reform projects was spent on appointing consultants.

Other spending went for the purposes of procuring hardware, software and logistics and training, he said.

"Unfortunately, by end of the project tenure most of the hardware went out of order, software became outdated and logistics turned obsolete," he said.

Trained officials of the projects were also transferred to other tax zones to deal with other issues, he added.

Executive director of the Policy Research Institute (PRI) of Bangladesh Dr Ahsan H Mansur echoed, saying most of the projects were unsuccessful due to the lack of willingness on the part of insiders at the tax-collecting agency.

The designs were faulty in nature as the projects were taken up without feasibility studies, he added.

VAT ONLINE PROJECT

The NBR started this project in 2014.

Until October 2018, over a quarter of the project fund was spent, though outcome was below the mark.

The only outcome of the project was the automation of VAT registration.

But it also did not escape criticism from the field-level VAT officials.

The officials argued the online registration process is faulty and is complicated to apply.

The project is by far the largest involving as much as Tk 6.90 billion, with the major portion coming from the World Bank.

The government is supposed to spend Tk 2.40 billion from its own coffers.

The project would continue until 2020 with an objective of digitising the VAT administration.

The government had launched the project to prepare groundwork for the VAT and Supplementary Law-2012, which was scheduled to be implemented from 2017.

The implementation of the law was deferred by two years after opposition from businesspeople.

Dr Mansur said the project has remained underperforming since its inception.

He, however, said there is still scope for making it functional by taking bold steps. He did not elaborate on the steps.

STRENGTHENING GOVERNANCE MANAGEMENT PROJECT (SGMP)

Under the governance project, Bitax was the largest component of income tax wing, which received Tk 510 million funds from the Asian Development Bank (ADB).

The project, which concluded in June 30, 2018, was launched to automate income tax return submission, processing and payment of taxes.

Under the project, the NBR had introduced e-payment of taxes in May 2012, which continued for three years.

Since 2015, the online payment system has remained inactive.

The NBR did not renew the contract of the software company to continue and upgrade the e-payment system for unknown reasons.

Online submission of tax returns was introduced under the project.

But taxpayers found the system to be complex and ineffective without the online payment system.

Income tax member Kalipada Halder, who was the project director, said since the system is in place, there is still scope for bringing changes in the online return submission system.

"Willingness of taxpayers to come under digital and transparent system is necessary to make the system effective," he said.

"We are planning to launch the second phase of the project on a larger scale to make its outcome sustainable," he said.

Taxpayers and field level tax officials said the online submission of tax returns will not work without e-payment and e-TDS (tax deducted at source) system.

INCOME TAX MANAGEMENT SYSTEM (ITMS):

The automated record-keeping system, launched in 2004, for analysing the large taxpayers' data has remained dysfunctional for the last two years.

The tax payment record of large taxpayers and their tax returns were automated under the system.

The system was inoperative after two experts, who were operating it, left without transferring technology.

And the NBR had taken no step to get the technical know-how to activate the system.

The experts, who were hired by UK's Department for International Development (DFID), left after the expiry of their tenures in December 2016.

The ITMS was the first automation step for the large taxpayers' tax returns.

It was considered one of the key systems of a digitised Large Taxpayers Unit (LTU) that deals with large amounts of taxes.

Officials of the unit said for the past 13 years until December 2016, they had used the internal database of large taxpayers for analysing data, monitoring revenue trend, and assessing sector-wise tax collection.

The system was used to give inputs of pay order, serve notices, find out tax defaulters and assess the risk of revenue losses from large taxpayers.

TAX ADMINISTRATION CAPACITY AND TAXPAYERS SERVICES (TACTS)

Undertaken from a DFID grant of Tk 750 million, the TACTS project started in October 2010 and was reviewed in 2013.

The project's term expired in September 2015.

Nine taxpayers' service centres across the country, LTU's branch office in Chattogram, internal control of audit, central survey zone's central data base were set up under the project. Around 400 officers received overseas training under the project.

Tax payers' services centres across the country are facing difficulties as no taxmen are willing to serve in such centres.

The automation of internal audit system, central data of survey zone also remained under-performing.

Former income tax member Dr Syed Aminul Karim, who was the project director, said none of the reform initiatives was sustained as a vested quarter was against transparency.

Had the system been sustained, the scope for corruption would be minimised, he said.

"We've taken many steps under the TACTS project. Those steps were not sustained due to the lack of motivation and bureaucratic red tape," he said.

INCOME TAXPAYERS DATA RETRIEVAL SYSTEM

The system has been handed over to the tax survey zone to retrieve taxpayers' data from different government and private agencies.

However, the system remained inoperative since its inception due to lack of expertise to operate.

It was vested with the central survey zone to conduct new taxpayers' survey.

The survey activity by the central survey zone has remained suspended for the last 16 years.

Tax officials said they wanted to digitise the survey system through the taxpayers' data retrieval system.

FORENSIC LAB AT CENTRAL INTELLIGENCE CELL

A forensic data laboratory was set up in 2013 spending around Tk 20 million at the Central Intelligence Cell (CIC) with support from the DFID under TACTS project. But the lab has remained non-functional since its installation.

It is one of the two cyber forensic labs in Bangladesh.

The other one run by Bangladesh Police is effectively functional.

The lab has the most up to date forensic data, data mining and intelligence devices and systems.

The NBR replicated the models of India, Malaysia and the United Kingdom.

These countries are using the labs effectively for detecting tax evasion in this era of digital technology, officials said.

Md Abdur Razzaque, former income tax member who was director general of the cell when the forensic lab was installed, said the lab was set up to check tax evasion by large taxpayers using advanced technology.

"Data mining and decoding of taxpayers' passwords in the computer system could be done through the system," he said.

Apart from the major reform and modernisation initiatives, electronic cash register, risk management cell, tobacco tax cell, central processing server, e-TDS, and the enforcement of new income tax, VAT and customs laws have had little success.

According to NBR's directive in 2010, businesses had installed ECR in their outlets.

In the current fiscal year, the board issued new directives to install another type of device, namely electronic fiscal device, by replacing the ECR.

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